Turkey Inflation

Turkey: Inflation moderates in October

November 3, 2015

In October, consumer prices rose 1.55% over the previous month, which followed September’s 0.89% increase and marked a six-month high. The rise was in line with market analysts’ predictions. According to the statistical office, October’s increase came on the back of higher prices for clothing and footwear as well as for transportation. While the sharp rise in clothing and footwear is expected to be temporary, continued exchange-rate pass through is expected to keep inflation at high levels.

Inflation declined from September’s four-month high of 8.0% to 7.6% in October. The core prices index, which excludes more volatile categories, such as unprocessed food and energy, increased 1.79% over the previous month in October (September: +0.80% month-on-month). Core inflation rose from 8.2% in September to 8.7% in October, hitting a nine-month high.

Turkey’s Central Bank forecasts inflation to be 7.9% at the end of 2015 and 6.5% in 2016. FocusEconomics panelists expect inflation to close 2015 at 8.1%, which is up 0.3 percentage points from last month’s forecast. For 2016, the panel sees inflation moderating to 7.1% by year-end, which is unchanged from the previous month’s estimate.

The current account balance recorded a USD 4.2 billion deficit in November, above market expectations of USD 4.0 billion, and a sizeable increase from the USD 2.2 billion shortfall recorded in November 2016.